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Gold Flat / Palladium Soars

November 29, 2017

The price of Gold is retreating from its most recent highs as Bond prices across the globe decline. It seems that no matter how many new longs come into the marketplace, the price of Gold just can’t break out into new territory.

There has been a lot of interest from some precious metal traders on the street participating in the Platinum / Palladium arbitrage ratio. Currently trading at a difference of $61 dollars. (The price of Palladium over Platinum.)

At the beginning of 2017, the price of Platinum was trading at $930 dollars and Palladium was at $715 dollars. Today the price of Platinum is trading at $948 and Palladium at $1,109 dollars. That’s an increase of only $ 18 dollars in Platinum and an increase of $394.00 in Palladium.

Many traders I spoke with have shorted the Platinum CME Futures contract and bought the Palladium CME Futures contract and continue to trade in and out of the two contracts locking in profits as the difference continues to expand.

Helping them along for months now has been the interest from some hedge funds speculating in the Palladium market.
It seems for a long time the Palladium market has been trading in a backwardation. Short supply in the spot market along with the chatter of fewer diesel cars being manufactured and more gas-powered cars being sold has helped the price along.

Open interest in the Palladium market well exceeds the available inventory in CME authorized warehouses. Even though the Exchange has some tools in its arsenal to prevent a short squeeze, one can never be 100 percent certain that a significant shortage in this product can ever be avoided.

For the ones who are interested in this market, following how the spot forwards rates trade is a must. Keep an eye on how wide the backwardation is quoted because that’s the key indicator of how short the supply has become.

For those who want to participate in the Physical Palladium market Dillon Gage has sufficient quantities to meet our clients’ demand.

Bitcoin

Bitcoin’s market cap now exceeds the market cap for either IBM or McDonalds or Disney.

Ever since the CME (Chicago Mercantile Exchange) announced that they will be issuing a Bitcoin Futures Contract back on October 31st, the price has gone straight up.

Just look where Bitcoin was trading back in September at $3,000 dollars and that’s just after the Chinese authorities announced a ban on trading Bitcoin in their country. At the time of this report Bitcoin has exploded over $11,000.

The Bitcoin phenomena puzzles many investors. If you look at it like a stock, you will see that it will only issue 21 million shares and never pay a penny in dividends. The only way is has any value is if the next guy is willing to pay you more for it. With NO intrinsic value how can this product survive?

BUT the craze continues as the price for Bitcoin just continues to grow and who knows how much higher it can go when the CME Future contracts come on board.

We all know JP Morgan’s boss Jamie Dimon claims that Bitcoin is a fraud but if that’s the case why are two regulated exchanges issuing a futures contract to track the price?

What amazes me is that it’s not just the retail investor who is buying Bitcoin, but many Hedge Funds have added it to their portfolios. And now there are more than 120 funds invested in various cryptocurrencies.

I would think that some regulation has to be put in place to govern these products, after all Uncle Sam will eventually want a piece of the action. My guess that as soon as the CME (a Regulated Exchange) issues the first Futures Contract, Uncle Sam and the IRS will be in the arena looking for their piece of the pie. The question remains where will the price be when that happens. There seems no stopping this crazed market for Bitcoin.

Have a wonderful Wednesday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.

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